Magtajas vs. Pryce Properties Corp., G.R. No.

111097, July 20, 1994

TOPIC: Power Relations with National Government and LGUs

DOCTRINE:
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is
a heresy to suggest that the local government units can undo the acts of Congress, from which they
have derived their power in the first place, and negate by mere ordinance the mandate of the
statute.

NATURE OF THE CASE:

This is a petition for review under Rule 45 of the Rules of Court assailing the CA Decision on
March 31, 1993 declaring the ordinances No. 3353 and Ordinance No. 3375-93 invalid.

PETITIONER: MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO

RESPONDENT: PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND

GAMING CORPORATION

FACTS:
In 1992 PAGCOR decided to expand its operations to Cagayan de Oro City (CDO City) and leased
a portion of a building belonging to Pryce Properties Corporation, Inc. (Pryce) who renovated
and equipped the same, and prepared to inaugurate its casino there during the Christmas
season.

On December 7, 1992, the Sangguniang Panlungsod of CDO City was hostile in enacting
Ordinance No. 3353 which bans the operation of casino within its territorial jurisdiction and the
cancellation of business permits for any persons, partnership or corporation who use its
business establishment or portion thereof, or allow the use thereof by others for casino
operation and other gambling activities.

On January 4, 1993, it adopted a sterner Ordinance No. 3375-93, citing Art. 3, section 458, No.
(4), sub paragraph VI of the Local Government Code (LGC) of 1991 (Rep. Act 7160) and Art. 99,
No. (4), Paragraph VI of the implementing rules of the LGC stating that the City Council as the
Legislative Body shall enact measure to suppress any activity inimical to public morals and
general welfare of the people and/or regulate or prohibit such activity pertaining to amusement
or entertainment in order to protect social and moral welfare of the community. The ordinance
has the same prohibitions but with harsher penalties.

Pryce assailed the ordinances before the CA, where it was joined by PAGCOR as intervenor and
supplemental petitioner.
CA Decision
On March 31, 1993, the CA declared the ordinances invalid and issued the writ prayed for to
prohibit their enforcement.

On July 13, 1993, Reconsideration of this decision was denied.

CDO City and mayor Magtajas are now before us in this petition for review under Rule 45 of the
Rules of Court.

Petitioner’s Contention
They aver that the respondent CA erred in holding that:
 The Sangguniang Panlungsod of the City of CDO does not have the power and authority to
prohibit the establishment and operation of a PAGCOR gambling casino within the City's
territorial limits.
 The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a),
sub-par. (1) — (v) of R.A. 7160 could only mean "illegal gambling."
 The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that
point.
 The questioned Ordinances are discriminatory to casino and partial to cockfighting and
are therefore invalid on that point.
 The questioned Ordinances are not reasonable, not consonant with the general powers
and purposes of the instrumentality concerned and inconsistent with the laws or policy of
the State.
 It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No.
91649, May 14, 1991, 197 SCRA 53 in disposing of the issues presented in this present
case.

ISSUE:
WON Ordinances No. 3353 and Ordinance No. 3375-93 are valid. NO

RULING:

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games
of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines.
In Basco v. Philippine Amusements and Gaming Corporation, this Court sustained the
constitutionality of the decree and even cited the benefits of the entity to the national economy
as the third highest revenue-earner in the government, next only to the BIR and the Bureau of
Customs.

CDO City, like other local political subdivisions, is empowered to enact ordinances for the
purposes indicated in the LGC. It is expressly vested with the police power under what is known
as the General Welfare Clause now embodied in Section 16 providing that LGUs shall exercise
the powers expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are essential
to the promotion of the general welfare.

In addition, Section 458 of the said Code specifically declares that:

Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficient and effective city
government, and in this connection, shall:

xxx xxx xxx

(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties
for habitual drunkenness in public places, vagrancy, mendicancy, prostitution,
establishment and maintenance of houses of ill repute, gambling and other prohibited
games of chance, fraudulent devices and ways to obtain money or property, drug
addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing,
distribution or exhibition of obscene or pornographic materials or publications, and such
other activities inimical to the welfare and morals of the inhabitants of the city;

This section also authorizes the local government units to regulate properties and
businesses within their territorial limits in the interest of the general welfare.

Petitioner’s Argument:
o By virtue of these provisions, the Sangguniang Panlungsod may prohibit the operation of
casinos because they involve games of chance, which are detrimental to the people.

o Gambling is not allowed by general law and even by the Constitution itself.

o The legislative power conferred upon LGUs may be exercised over all kinds of gambling and
not only over "illegal gambling" as the respondents erroneously argue.

o Even if the operation of casinos may have been permitted under P.D. 1869, the
government of CDO City has the authority to prohibit them within its territory pursuant to
the authority entrusted to it by the LGC.
o This interpretation is consonant with the policy of local autonomy as mandated in Article
II, Section 25, and Article X of the Constitution.
 o In giving the LGUs the power to prevent or suppress gambling and other social problems,
the LGC has recognized the competence of such communities to determine and adopt the
measures best expected to promote the general welfare of their inhabitants.

o When the Code expressly authorized the local government units to prevent and suppress
gambling and other prohibited games of chance, it meant all forms of gambling without
distinction. Otherwise, it would have expressly excluded from the scope of their power
casinos and other forms of gambling authorized by special law.

o The adoption of the LGC had the effect of modifying the charter of the PAGCOR, the Code
being a later enactment than P.D. 1869 and so is deemed to prevail, and hence the powers
of the PAGCOR under the decree are expressly discontinued by the Code insofar as they do
not conform to its philosophy and provisions, pursuant to Par. (f) of its repealing clause
reading as follows:

(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly.

o Assuming there is doubt regarding the effect of the LGC on P.D. 1869, the doubt must be
resolved in favor of the petitioners, in accordance with the direction in the Code calling for
its liberal interpretation in favor of the local government units (Section 5 of the LGC).

o The petitioners attack gambling as intrinsically harmful and cite various provisions of the
Constitution and several decisions of this Court expressive of the general and official
disapprobation of the vice. They invoke the State policies on the family and the proper
upbringing of the youth and, as might be expected, call attention to the old case of U.S. v.
Salaveria, which sustained a municipal ordinance prohibiting the playing of panguingue.

o They impugn the wisdom of P.D. 1869 in creating PAGCOR and authorizing it to operate
casinos "on land and sea within the territorial jurisdiction of the Philippines."

On the morality of gambling

It is not a justiciable issue. Gambling is not illegal per se. While it is generally considered
inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all . It is left to
Congress to deal with the activity as it sees fit. In the exercise of its own discretion, the
legislature may prohibit gambling altogether or allow it without limitation or it may prohibit
some forms of gambling and allow others for whatever reasons it may consider sufficient. Thus,
it has prohibited jueteng and monte but permits lotteries, cockfighting and horse-racing.
It is settled that questions regarding the wisdom, morality, or practicability of statutes are not
addressed to the judiciary but may be resolved only by the legislative and executive departments , to
which the function belongs in our scheme of government which is exclusive.

On the validity of Ordinance No. 3355 and Ordinance No. 3375-93

The tests of a valid ordinance are well established. A long line of decisions has held that to be
valid, an ordinance must conform to the following substantive requirements:

1) It must not contravene the constitution or any statute.

2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.

Under Sec. 458 of the LGC, LGUs are authorized to prevent or suppress, among others,
"gambling and other prohibited games of chance" and this provision excludes games of
chance which are not prohibited but are in fact permitted by law. The petitioners are
incorrect in its claims that the Code has excluded games of chance. The language of the section is
clear and unmistakable. Under the rule of noscitur a sociis, a word or phrase should be
interpreted in relation to, or given the same meaning of, words with which it is associated.
Accordingly, the court concluded that since the word "gambling" is associated with "and other
prohibited games of chance," the word should be read as referring to only illegal gambling
which, like the other prohibited games of chance, must be prevented or suppressed.

o On the adoption of the LGC having the effect of modifying the charter of the PAGCOR

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and
the public policy embodied therein insofar as they prevent PAGCOR from exercising the
power conferred on it to operate a casino in CDO City.

The petitioners deny that it is the ordinances that have changed P.D. 1869 for an ordinance
admittedly cannot prevail against a statute. Their theory is that the change has been
made by the LGC itself, which was also enacted by the national lawmaking authority. In
their view, the decree has been, not really repealed by the Code, but merely " modified pro
tanto" in the sense that PAGCOR cannot now operate a casino over the objection of the
LGU unit concerned. This modification of P.D. 1869 by the LGC is permissible because
one law can change or repeal another law. The petitioners are playing with words; while
insisting that the decree has only been " modified pro tanto," they are actually arguing
that it is already dead, repealed and useless for all intents and purposes because the
Code has cut off PAGCOR of all power to centralize and regulate casinos. Strictly
speaking, its operations may now be not only prohibited by the local government unit; in
fact, the prohibition is not only discretionary but mandated by Section 458 of the Code if
 the word "shall" as used therein is to be given its accepted meaning. Local government
units have now no choice but to prevent and suppress gambling, which in the petitioners'
view includes both legal and illegal gambling. Under this construction, PAGCOR will have
no more games of chance to regulate or centralize as they must all be prohibited by the
local government units pursuant to the mandatory duty imposed upon them by the Code.
In this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a
white elephant and will no longer be able to exercise its powers as a prime source of
government revenue through the operation of casinos.

o On the petitioner’s citing of Sec. 534. Par. (f) of the repealing clause

Petitioners conveniently discarded the rest of the provision which painstakingly mentions
the specific laws or the parts thereof which are repealed (or modified) by the Code and
P.D. 1869 is not one of them.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the
absence of a clear and unmistakable showing of such intention. In Lichauco & Co. v.
Apostol, this Court explained:

The cases relating to the subject of repeal by implication all proceed on the
assumption that if the act of later date clearly reveals an intention on the part of
the lawmaking power to abrogate the prior law, this intention must be given
effect; but there must always be a sufficient revelation of this intention, and it
has become an unbending rule of statutory construction that the intention to
repeal a former law will not be imputed to the Legislature when it appears that
the two statutes, or provisions, with reference to which the question arises bear to
each other the relation of general to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the

contrary, as the private respondent points out, PAGCOR is mentioned as the source of
funding in two later enactments of Congress:

 R.A. 7309, creating a Board of Claims under the DOJ for the benefit of victims
of unjust punishment or detention or of violent crimes
 R.A. 7648, providing for measures for the solution of the power crisis.

PAGCOR revenues are tapped by these two statutes. This would show that the PAGCOR
charter has not been repealed by the LGC but has in fact been improved as it were
to make the entity more responsive to the fiscal problems of the government.

o On the assumption of a conflict between P.D. 1869 and the Code

The proper action is not to uphold one and annul the other but to give effect to
both by harmonizing them if possible. The proper resolution of the problem at hand is
 to hold that under LGC, LGUs may (and indeed must) prevent and suppress all kinds of
gambling within their territories except only those allowed by statutes like P.D. 1869. The
exception reserved in such laws must be read into the Code, to make both the Code and
such laws equally effective and mutually complementary.

This approach would also affirm that there are indeed two kinds of gambling, to wit, the
illegal and those authorized by law. Legalized gambling is not a modern concept; it is
probably as old as illegal gambling, if not indeed more so. The petitioners' suggestion that
the Code authorizes them to prohibit all kinds of gambling would erase the distinction
between these two forms of gambling without a clear indication that this is the will of the
legislature.

In light of all the above considerations, the Court found that the ordinances violate P.D. 1869 ,
which has the character and force of a statute, as well as the public policy expressed in the
decree allowing the playing of certain games of chance despite the prohibition of gambling in
general.

The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local councils
exercise only delegated legislative powers conferred on them by Congress as the national
lawmaking body. The delegate cannot be superior to the principal or exercise powers
higher than those of the latter. It is a heresy to suggest that the local government units can
undo the acts of Congress, from which they have derived their power in the first place, and
negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot exist.
As it creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is
some constitutional limitation on the right, the legislature might, by a single act, sweep from
existence all of the municipal corporations in the State, and the corporation could not prevent it.

This basic relationship between the national legislature and the local government units
has not been enfeebled by the new provisions in the Constitution strengthening the policy
of local autonomy. The Court confirms that Congress retains control of the LGUs although in
significantly reduced degree now than under our previous Constitutions. The power to create
still includes the power to destroy. The power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the Constitution, like the direct conferment
on the local government units of the power to tax, which cannot now be withdrawn by mere
statute. By and large, however, the national legislature is still the principal of the LGUs, which
cannot defy its will or modify or violate it.
Conclusion
The Court held that:
o The power of PAGCOR to centralize and regulate all games of chance, including casinos on
land and sea within the territorial jurisdiction of the Philippines, remains unimpaired.
o P.D. 1869 has not been modified by the LGC, which empowers the LGUs to prevent or
suppress only those forms of gambling prohibited by law.
o Casino gambling is authorized by P.D. 1869 and this decree has the status of a statute that
cannot be amended or nullified by a mere ordinance.

Hence, it was not competent for the Sangguniang Panlungsod of CDO City to enact Ordinance No.
3353 prohibiting the use of buildings for the operation of a casino and Ordinance No. 3375-93
prohibiting the operation of casinos. For all their praiseworthy motives, these ordinances are
contrary to P.D. 1869 and the public policy announced therein and are therefore ultra vires and
void.

DECISION:
WHEREFORE, the petition is DENIED and the challenged decision of the respondent CA is
AFFIRMED, with costs against the petitioners. It is so ordered.